J.P. Morgan, Huntington lead financials rally

JoyceKoh

NEW YORK (MarketWatch) -- J.P. Morgan Chase's and Huntington Bancshares' upbeat earnings pushed bank stocks higher for a second session on Thursday, as shares of Fannie Mae and Freddie Mac also continued to surge.

Shares of the U.S. mortgage giants ended about 20% higher, with Fannie Mae
FNM, +7.06%
closing up $1.68 to $10.93 and Freddie Mac
FRE, +2.65%
finishing up $1.50 to $8.33, on the heels of a rally in the previous session.

The companies, whose shares have slumped more than 70% in the past month on concern over losses tied to the mortgage industry, appeared to get a reprieve after the SEC earlier this week announced new rules to prevent "naked" short-selling of their shares. See related story.

J.P. Morgan Chase
JPM, -0.46%
kicked off the day on a positive note, as the blue-chip heavyweight reported a 53% drop in second-quarter earnings, a performance that still came in ahead of Wall Street expectations. Its write-offs and provisions were also better than expected and smaller in scale than those reported by some major rivals. See full story.

Investors applauded the results, sending J.P. Morgan shares more than 13% higher to close at $40.80.

After-hours action

Merrill Lynch
MER, +1.71%
shares fell in late trading after the company reported a second-quarter loss of $4.97 a share against a profit of $2.24 a share in the year-ago period. The firm was expected to lose $1.91 a share, according to the average estimate of 17 analysts surveyed by Thomson Reuters. The financial heavyweight also said it has sold its 20% stake in Bloomberg for $4.425 billion and is in talks to sell Financial Data Services. Read full story.

The stock closed up 9.75% to $30.73 Thursday, but traded down 4.8% to $29.25 after hours.

Capital One Financial Corp.
COF, -1.08%
reported quarterly earnings of $1.21 a share, down from $1.89 a share in the same period last year. Analysts polled by FactSet had expected $1.32 a share. Its stock had closed 14.81% higher at $42.80.

Zions Bancorp
ZION, -0.49%
posted second-quarter net income of 65 cents a share, down from $1.43 a share in the year-ago period. The bank also recorded $38.8 million in second-quarter pretax impairment losses. Its share price gained 16.86% to $27.51 Thursday.

More buoyant gains

Wachovia Corp.
WB, -0.31%
ended 27.5% higher to $13.44, notwithstanding reports that a team of state securities regulators have shown up at the St. Louis headquarters of its affiliate Wachovia Securities, seeking documents and interviews about the firm's auction-rate securities operations.

Wachovia, which last week named former Treasury undersecretary and Goldman Sachs executive Robert Steel as president and CEO, will report second-quarter financial results on July 22.

Shares of regional banks also surged Thursday despite a mixed batch of results.

The star performers were Huntington Bancshares and MGIC Investment Corp, which both rose 40% Thursday.

The top gainer among financials was Huntington Bancshares
HBAN, +0.11%
which ended at $7.98. Its stock is down 60% over the past year.

The Columbus, Ohio-based bank reported a 26% rise in second-quarter earnings to $101.4 million, or 25 cents a share, from $80.5 million, or 34 cents, in the year-ago period. Huntington also lowered its full-year forecast, due to an assumed higher provision for loan and lease losses. See full story.

MGIC Investment Corp.
MTG, +3.12%
shares ended at $5.70. Its stock is down 90% over the past year.

The Milwaukee-based mortgage-insurance specialist swung to a second-quarter loss as delinquencies and foreclosures remain at elevated levels resulting from lower home values and a softening economy.

Its quarterly loss of 79 cents a share was higher than the 73 cents a share that analysts polled by FactSet Research had expected the company to report. See full story.

Meanwhile, National City Corp.
NCC, -2.92%
and Bank of New York Mellon Corp.
BK, -1.63%
spent the day in the basement, as shares of the two top sector losers both shed more than 5%.

Earlier Thursday, Bank of New York Mellon reported second-quarter net income fell 31%, reflecting a $380 million charge tied to sale-in-lease-out transactions.

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